Washington, Dec. 3--Productivity at U.S. companies hit a 20-year high in the third quarter.
Nonfarm business productivity, which measures the amount an employee produces per hour, grew at a seasonally adjusted annual rate of 9.4% from July through September, the Labor Department said Wednesday.
That was the strongest showing since the second quarter of 1983, after the recession from 1981 to 1982, when productivity grew at a blistering 9.7% pace. It also topped the government's initial estimate of 8.1%, and the second quarter's productivity rate of 7%.
Economists had expected an increase of 9.2% in the third quarter, according to a survey by Dow Jones Newswires and CNBC.
"This is the typical post-recession acceleration and greatly overstates underlying productivity growth," said Steven Wood, chief economist at Insight Economics. "Nevertheless, there has been a fundamental shift to stronger productivity gains since the mid-1990's."
On a year-over-year basis, the increase was a whopping 5%, the fastest rate in 53 years.
But the gains weren't entirely due to employers' squeezing more effort out of reduced work forces: workers' hours expanded at the fastest pace in three years.
The revision partly reflected changes in the government's estimate of the gross domestic product in the third quarter. The Commerce Department said last month that GDP grew at an annual rate of 8.2%, a full percentage point above the initial estimate. As a result, the Labor Department revised its estimate of nonfarm business output to 10.3% from 8.8% initially. Workers' hours increased by 0.8%, up from the initial estimate of 0.7%.
Over the long run, productivity growth boosts corporate profits, allowing businesses to raise wages without fanning inflation, or a general rise in prices. But in the past few years, the increasing efficiency of U.S. workers has proved to be a hazard to their own job security: Employers found they could easily meet rising demand with reduced work forces.
Most economists say the economy has now started to grow at pace that will force employers to accelerate the pace of hiring. Economic growth in the third quarter, for example, was the fastest in 20 years. Most forecasters say the government is likely to say that the nation's payrolls grew by 150,000 nonfarm jobs in November, when it reports on the labor market on Friday.
Unit labor costs fell 5.8%, the biggest decline in 20 years. Adjusted for inflation, workers' average hourly compensation rose 0.7%, down from a 3% increase in the second quarter.
Durable-goods manufacturers saw the biggest gain in productivity -- at 14.8%, it is the largest increase in 32 years. The overall manufacturing sector saw a productivity gain of 9%, up from a 2.8% rate in the second quarter.
Productivity gains were also impressive in the nonfinancial corporate sector at 9.2%, the biggest increase in two years.
